US Dollar Falls as Euro, Pound Extend Gains

The US dollar fell more than half a percent against a basket of its major competitors amid disappointing pending home sales data from the United States.

Contracts for previously-owned homes rose for the first time in six months, according to the National Association of Realtors. However, the monthly rate of 0.2 percent was well below forecasts calling for a 1 percent gain.

The euro extended its bullish streak against the greenback, gaining 38 pips to 1.3805 US. The euro strengthened following the Christmas holiday after European Central Bank Governing Council member Jens Weidmann cautioned against implementing arbitrary monetary policy to fight deflation. The euro has advanced more than 1 percent against its US counterpart since Friday.

Elsewhere in Europe, the British pound remained close to its 28-month highs, gaining 29 pips to 1.6516 US. Sterling has gained nearly 1 percent since Friday and more than 7.5 percent since July. The British pound will close out the year as one of the best developed-nation currencies of 2013, buoyed by strong fundamentals and a faster than forecasted recovery. The UK economy has been in expansion mode since the first quarter of 2013.

In North America, the greenback eased off its highs against the Canadian dollar, falling 61 pips to 1.0643 CAD. The Canadian dollar will have an uphill battle in 2014. According to the Bank of Canada, the true north’s economy will grow 2.3 percent next year.

Down-under, the Australian dollar retraced all of its recent losses, advancing 66 pips to 0.8921 US. The near-term outlook on the Aussie remains mildly bearish, as market participants begin clearing books before the end of the year.

Trading volumes in the foreign exchange markets were light on Monday, reflecting the uneventful newswire. News releases will remain light until Thursday, when Markit Group is expected to release manufacturing PMI for the United States and several European economies.

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